2007 Annual report (PDF 8.1 Mb) - University of Melbourne

NOTES TO AND FORMING PART OF THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1.5 Income Tax
The University of Melbourne and its subsidiaries, with the exception of some of the wholly owned subsidiaries of UMEE Ltd, are exempt
from income tax pursuant to Part 50.1 of the Income Tax Assessment Act 1997. The overseas subsidiaries of UMEE Ltd are subject to
income tax in the relevant tax jurisdictions.
The balance sheet method of tax-effect accounting is adopted.
1.6 Cash and Cash Equivalents
For the purpose of the Cash Flow Statement, cash and cash equivalents include cash on hand and at bank, at-call deposits and bank bills
with a maturity of 90 days or less.
1.7 Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less any provision for impairment.
Trade receivables are due for settlement no more than 30 days from the date of recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision
for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows. Cash flows relating to short-term receivables are not discounted as the effect of discounting is immaterial.
The amount of the provision is recognised in the Income Statement.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the
Income Statement in Note 13. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited against other expenses in the Income Statement.
1.8 Inventories
Annual stocktakes of inventories are undertaken at all locations.
Inventories comprising Finished Goods, Raw materials, Work in progress, Fodder and Hay stocks are measured at the lower of cost and net
realisable value, with adjustments made to take account of obsolescence.
The Group’s livestock, orchards and picked fruit are measured at their fair value less estimated point-of-sale costs in accordance with AASB
141 Agriculture. The fair value of these items is determined based on market prices in the local area.
Costs are assigned to individual items of inventory on the basis of the first-in, first-out method.
1.9 Financial Instruments
AASB 139 Financial Instruments: Recognition and Measurement has four categories of financial instruments including: financial assets
at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The
classification of investments depends on the purpose for which they were acquired. The classification of investments is determined by
management at initial recognition and is re-evaluated at each reporting date.
(i) Financial Assets at Fair Value through Profit or Loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on
initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if
so designated by management. Derivatives are categorised as held for trading unless they are designated as hedges. Assets in this
category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the
balance sheet date. Realised and unrealised gains and losses are included in the Income Statement in the period in which they arise.
(ii)
(iii)
(iv)
Commercial paper, floating rate notes and corporate securities were designated at the date of transition to AIFRS as financial assets
at fair value through profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial
assets at fair value through profit or loss’ category are included in the Income Statement in the period in which they arise.
Loans and Receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They arise when an entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They
are included in current assets, except for those with maturities greater than twelve months after the balance sheet date, which are
classified as non-current assets. Loans and receivables are carried at amortised cost using the effective interest method.
Held-to-Maturity Investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities where
management has the positive intention and ability to hold to maturity. Held‐to‐maturity investments are carried at amortised cost
using the effective interest method. At the reporting date, the Group did not hold any financial assets in this category (2006, Nil).
Available-for-Sale Financial Assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated
in this category or not classified in any of the other categories. They are included in non‐current assets unless management intends
to dispose of the investment within twelve months of the balance sheet date.
Shares, convertible notes and listed income securities were designated at the date of transition to AIFRS as available‐for‐sale
financial assets. Unrealised gains and losses arising from changes in the fair value are recognised in equity in the available-for-sale
investments revaluation reserve. When securities classified as available‐for‐sale are sold or impaired, the accumulated fair value
adjustments are included in the Income Statement as unrealised gains and losses from investment securities.